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Wednesday, August 12, 2009

Sangam India Ltd:Future growth prospects and outlook

Scripscan:Sangam India Ltd

Story:Textiles is a commodity business, but not entirely for all manufacturers in the supply chain. Look at Sangam India. Sangam makes dyed polyester viscose yarn (PVY), which is sold to textile manufacturers like Reliance, Grasim, Siyaram, etc. It also uses the yarn to make fabrics, but right now 70% of its revenues come from selling PVY. Sangam exports about 15% of its output to 30 countries in Europe and the Middle East. Sangam’s products and processes are not spectacular. They are plain vanilla stuff. But, while fabric and garment manufacturers like Grasim, Arvind and Siyaram will have to fight for consumers’ wallet through expensive advertising and marketing strategies, Sangam, being a supplier of an intermediary product (PVY), is not subject to those challenges and pressures, especially since it is a dominant player in its segment. As a PVY manufacturer with 27% market share, it is, indeed, an important player. And it is planning to strengthen that position with a significant expansion.Sangam has expanded the dyed PVY capacity to 31,000 tonnes from 23,000 now, add 5,400 tonnes of cotton yarn capacity and 26,000 tonnes of PVY capacity. Total yarn capacity has trebled. It has also added 21MW of power capacity, which will substantially lower its power cost. These are linked to the expansion plan Sangam is putting through now.But all said and done,Numbers should dictate the future price trend for the company.A risky buy at 20 levels.

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